Brief performance review
On August 27, the company released its 24-year semi-annual report. 1H24 achieved revenue of 11.88 billion yuan, +13.1% (adjusted): net profit to mother of 4.17 billion yuan, +22.5% (adjusted); achieved revenue of 7.46 billion yuan in 2024, +10.2% (adjusted); achieved net profit of 3.1 billion yuan (adjusted), and realized net profit to mother of 3.1 billion yuan, YoY +19.3% (adjusted).
Management analysis
Installed capacity growth+incoming water improvement will drive 2024 power generation +26.1%, 1) Hydropower: 1H24 Lancang River Liucheng incoming water is about 30% off year on year. In addition, the first unit of the superimposed Toba Hydropower Station was put into operation in June. In 2024, the company completed 29.5 billion kilowatt-hours of hydropower generation, +24.1% over the same period last year.
2) New energy: 1H24 added about 1.33 million kilowatts of PV installed, +149.7%. The target for new energy installations in 2024 was about 43%, and wind and light generated 0.11 and 0.9 billion kilowatt-hours respectively in 2024, -5.3% and +197.4% year-on-year respectively; among them, wind power was affected by poor wind resources in Q2, and PV was driven by installed capacity growth.
The high increase in renewable energy has eased the contradiction between electricity supply and demand in Yunnan, and the average feed-in tariff in 2024 has also declined. In 2024, the electricity generation capacity in Yunnan Province was +30.4%. Among them, the incremental contribution rates of hydropower/wind power/photovoltaics were 78.5%/35.8%/35.2%, respectively. The high increase in renewable energy consumption alleviated the tight electricity supply and demand situation in Yunnan Province. The operating rate of 5M24 electrolytic aluminum in Yunnan has reached more than 90%, which is about 32 pcts higher than the same period last year. Affected by the loosening of supply and demand, we are not considering other businesses that account for less than 1% of the company's revenue. Using operating revenue/feed-in power, the company's 2024 comprehensive average feed-in price is about 0.247 yuan/kmh (excluding tax), a decrease of about 0.037 yuan/kWh from the same period last year, a decrease of about 13.0%, and comprehensive financing costs fell below a record low of 3%. The three expenses saved 0.32 billion yuan compared to the calendar schedule.
Due to the transfer of the full capacity of the energy power plant to China in 2024, the depreciation cost of 2024 kilowatt-hour electricity increased by about 6 percent per kilowatt hour; combined with the year-on-year decline in the consolidated average feed-in electricity price, the gross sales margin of the 2024 company was 63.4%, -0.4 pct year on year. However, in the context of interest rate cuts, the company focused on lean management of the whole process, and the cost of comprehensive financing fell to 2.96%, a year-on-year reduction of 40 bps; the three expenses saved 0.32 billion yuan compared to the calendar schedule, helping the company achieve a net sales margin of 44.7% in 2024, +0.9 pct year-on-year.
Profit Forecasts, Valuations, and Ratings
From 2024 to 2026, the company is expected to achieve net profit of 8.77/10.14/11.26 billion yuan, EPS of 0.49/0.56/0.63 yuan, respectively. The current price of the company's stock corresponds to PE valuations of 24 times, 20 times, and 18 times, respectively, maintaining a “buy” rating.
Risk warning
Downstream electricity demand falls short of expectations, incoming water falls short of expectations, installed scenery falls short of expectations, and the entry of new energy sources into the market poses volume and price risks, etc.